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Ireland’s Oil Dependence: Trends, Prospects & Options Prepared for by Amárach Consulting & Dr. Robert Hirsch February 2006 © Amárach Consulting, 2006 About the Authors Amárach Consulting specializes in strategic research and forecasting. Its group of companies has a total of 50 executive and support staff in Ireland and the UK. Amárach has pioneered research into energy issues in Ireland, having conducted a number of studies and surveys relating to business and household energy use and preferences. Amárach’s directors have spoken and written regularly on energy and oil issues at conferences and senior management briefings for clients, as well as publishing articles and reports relating to Ireland’s energy situation and prospects. Dr. Robert Hirsch is a Senior Energy Program Advisor at SAIC and a consultant in energy, technology, and management. Previously, he was a senior staff member at RAND, where he did energy policy analysis. He has managed technology programs in oil and natural gas exploration and production, petroleum refining, synthetic fuels, fusion, fission, renewables, defense technologies, chemical analysis, and basic research. He is immediate past Chairman of the Board on Energy and Environmental Systems of the National Research Council, the operating arm of the National Academies. In 2005, he co­authored a report on ‘Peaking of World Oil Production: Impacts, Mitigation and Risk Management’ for the US Department of Energy. Ireland’s Oil Dependence: Trends, Prospects & Options 2 Contents Page Introduction, Objectives & Methodology 5 Executive Summary & Recommendations 7 1. The Global Nature of Peak Oil 11 2. Ireland & Oil 29 3. The Sectoral Impact of Peak Oil 45 4. Scenarios for the Mitigation of Peak Oil 57 5. Policy Implications and Recommendations 71 Appendices: Appendix 1: Names & Background Details of Individuals consulted during Research Process 81 Appendix 2: Names & Background Details of Individuals in Attendance at Amárach / Forfás Workshop 1 (3rd November 2005) 82 Appendix 3: Names & Background Details of Individuals in Attendance at Amárach / Forfás Workshop 2 (8th November 2005) 83 Ireland’s Oil Dependence: Trends, Prospects & Options 3 Ireland’s Oil Dependence: Trends, Prospects & Options 4 Introduction, Objectives & Research Methodology Introduction There is a growing level of evidence to suggest that as the era of a plentiful supply of cheap oil approaches an end, geologists agree that at some future date, conventional oil supply will no longer be capable of satisfying world demand. At this point world conventional oil production will have peaked and begin to decline. Though this subject is very much clouded by a low level and quality of accurate and credible data, there is near global consensus that the potential consequences of peak oil for governments, economies, businesses and indeed individual consumers must be now be considered. Although we have only recently begun to see the trickledown impact of rising oil prices, in that fuel costs have more than doubled over the past two years, prompting the International Energy Agency to publish a report last year ‘Saving Oil in a Hurry,’ interest in the subject of peak oil is not a new phenomenon. Industry experts, analysts and indeed those who work ‘on the ground’ have long been aware of the possibility of peak oil and as such, reports in this area date back to the previous decade. There has however been an explosion in interest and citations in the public domain that now refer to the term ‘peak oil.’ Whilst the timing of peak oil is widely debated, the potential problems are not, in that as peaking is approached, liquid fuel prices and price volatility will increase dramatically, and governments, businesses and economies at large, will face unprecedented economic and social change. Indeed, the rapid rise in world oil prices over the past twelve months could well appear modest in comparison to the price escalations and oil shortages that are likely to accompany the peaking of world conventional oil production. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact on a world scale, they must be initiated more than a decade in advance of peaking; “Reliable, secure and competitively priced energy supply is a vital ingredient in the competitiveness of industry and long term economic development” (National Competitiveness Council, ACR 2004). It is against this backdrop that Forfás has decided to undertake a baseline study on oil dependence in Ireland Amárach Consulting in conjunction with its international research partner, Dr. Robert L. Hirsch, were commissioned to carry out the research. Objectives The overall objective of this study is to assess Ireland’s reliance on a single volatile resource as a key input into the Irish economy. In tackling what is possibly an unprecedented risk management problem, the challenge from the outset is three­fold; to ensure that a common level of understanding exists around the area of peak oil and to recognise that at some point, mitigation strategies must be considered. Secondly to assess what implications peak oil potentially holds for the Irish economy and finally to identify the correct approaches which could be adopted in a timely and effective manner. The key objectives are thus to: ♦ Review the literature on energy both globally and in Ireland in terms of trends, issues and indicators, oil peaking forecasts, developed energy scenarios, security of supply and renewable energy sources. ♦ Profile the Irish oil market in terms of suppliers, both domestic and multinational. ♦ Analyse current energy requirements of the electricity, transport and enterprise sector in terms of electricity requirements and the use of oil as a direct (e.g. as a raw material) and indirect input, in terms of their reliance on oil both directly and indirectly. ♦ Identify the major existing sectors of the Irish economy at risk in the event of an oil peak. ♦ Identify emerging sectors in the Irish economy that may also be at risk. Ireland’s Oil Dependence: Trends, Prospects & Options 5 ♦ Examine Ireland’s vulnerability in the event of an oil shock / oil peak (using a number of oil price / availability scenarios to 2030) relative to other countries and the impact on Ireland’s overall competitiveness. ♦ Identify existing polices that may need to be reviewed in light of the findings of this particular study ♦ Make policy recommendations to ensure that Ireland’s competitiveness is maintained and strengthened in terms of its reliance on oil. Research Methodology The work programme involved a combination of approaches all of which aimed to address the aforementioned research objectives, comprising: Literature Review: A national and international review of contemporary reports, trends and views on both global and Irish dependence of oil In­depth Interviews with Industry Experts: A consultation process was undertaken with a diverse and representative range of experts both in Ireland, Europe and the United States Data Analysis: Amárach and their research partner analysed data collected during the research phase to input into various scenario modeling techniques. Workshops: Amárach Consulting and Forfás hosted two workshops designed to undertake a practical process with a diverse audience aimed at discussing the findings of the research to date and the implications this holds for policy options Ireland faces. Report Layout This report is divided into the following sections: Chapter 1 presents a review of the national and international literature on the subject of Peak oil Chapter 2 examines in detail Ireland’s oil requirements Chapter 3 identifies sectors of the Irish economy at risk from an oil peak Chapter 4 sets out mitigation scenarios in the event of a Peak oil induced shock at global level Chapter 5 assesses policy options and recommendations to ensure Ireland’s competitiveness is maintained. The appendices list those who were interviewed as part of this study or who participated in one or more workshops. The authors wish to stress that the opinions and views set out in the following document are not necessarily those of the interviewees nor of the participants in the workshops. Ireland’s Oil Dependence: Trends, Prospects & Options 6 Executive Summary There is a growing level of evidence to suggest that as the era of a plentiful supply of cheap oil approaches an end, geologists agree that at some future date, conventional oil supply will no longer be capable of satisfying world demand. At this point world conventional oil production will have peaked and begin to decline. Though this subject is very much clouded by a low level and quality of accurate and credible data, there is near global consensus that the potential consequences of peak oil for governments, economies, businesses and indeed individual consumers must be now be considered. In the context of a global dependence on conventional oil, this study carries the overall objective of assessing Ireland’s reliance on a single volatile resource as a key input into the Irish economy. The study therefore seeks to provide an overview of current literature on the topic of peak oil, with the intention of feeding into a more focused analysis of Ireland’s oil industry and the implications for various sectors of the economy in light of peak oil and Ireland’s current and future energy requirement. An analysis of possible scenarios in light of peak oil is undertaken as is a review of current energy policy in Ireland and what implications this holds for our recommendations in view of the above objectives. ‘Peak oil’ refers to the forecast that global oil output will eventually peak and then fall at some point in the next number of years – or decades. The timing of the peak in oil output is difficult to forecast due to uncertainties about the likely output of existing oil fields in the future, as well as about the expected output of new oilfields. As such, there is a wide range of forecasts for the timing of peak oil, from forecasts that the global peak will occur before 2010 to others that put the peak out beyond 2030.

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